National Pension System (NPS) has introduced by the Indian Govt. in the year 2004. All citizens of India can avail of NPS, which has regulated by Pension Fund Regulatory and Development Authority (PFRDA). This is a monthly contribution system for NPS Pension Fund. There are 08 different pension funds has been managed for the whole amount of NPS. These are:
SBI Pension Fund Pvt. Ltd.
UTI Retirement Solutions Ltd.
LIC Pension Fund Ltd.
HDFC Pension Management Co. Ltd.
Birla Sunlife Pension Management Ltd.
Reliance Capital Pension Fund Ltd.
Kotak Mahindra Pension Fund Ltd.
ICICI Prudential Pension Fund Management Ltd.
For Partial Withdrawal: You can withdraw partially from the NPS corpus for specified purposes. Under existing NPS withdrawal rules, the maximum amount that you can withdraw is up to 25% of your total contribution (not calculated on the total NPS account balance). However, to avail of the NPS partial withdrawal benefit, you need to have been an NPS subscriber for at least 5 years at the time of withdrawal. Partial withdrawals can only be made up to three times during the entire tenure of your NPS account. Under existing rules of the national pension system, these partial withdrawals are completely tax-free.
Partial NPS withdrawals can be requested for the following reasons :
Higher education for children
Marriage of children
For the purchase or construction of a residential house or flat either in your own name or jointly with your spouse. However if you already own or jointly own a house or flat other than ancestral property, this will not be permitted.
For the treatment of any of the illnesses mentioned below. The patient can be the subscriber, his spouse, children or dependent parents.
Preliminary Pulmonary Arterial Hypertension
Major Organ Transplant
Coronary Artery Bypass Graft
Aorta Graft Surgery
Heart Valve Surgery
Accident of a serious/life-threatening nature
Any other critical illness of a life-threatening nature specified by the PFRDA from time to time
In case of retirement:
NPS withdrawal rules in case of retirement are detailed below –
If the accumulated corpus in one’s NPS account is equal to or less than Rs.2 Lakh, then he/she can withdraw their entire fund.
If one’s accumulated corpus is more than Rs.2 Lakh, then 40% of this fund will go towards purchasing an annuity plan.
The balance can be withdrawn in a lump sum and can also be postponed till one reaches 70 years of age.
Mr X has retired and plans to withdraw from his NPS account. The accumulated corpus in his account is Rs.25 Lakh. According to requisite NPS withdrawal rules, he will be able to withdraw Rs.15 Lakh (60% of Rs.25 Lakh). The remaining Rs.10 Lakh will be used to purchase an annuity.
In case of voluntary exit:
NPS subscribers can get voluntarily exit from this scheme before the completion of their tenure in such cases is:
Subscribers have to hold an account for a minimum time period of 10 years to be eligible for the voluntary exit.
An account holder can withdraw the entire amount if the accumulated corpus is less than Rs.1 Lakh.
If the accumulated fund is more than Rs.1 Lakh, 80% of this amount will go towards the purchase of an annuity plan.
Mr Y plans to prematurely exit from NPS at the age of 40. He has Rs.20 Lakh in his account. Now, as per the NPS withdrawal rules, he will be able to withdraw only Rs.4 Lakh (20% of Rs.20 Lakh). The remaining Rs.16 Lakh will be used to purchase an annuity.
It should be noted that both the withdrawn amount and the annuity will be taxable. The corpus withdrawn will be added to the subscriber’s income and taxed as per the income tax slab he/she belongs to.
NPS Tier-I account withdrawal Online process:-
The steps for NPS withdrawal online from a Tier-I Account are mentioned below:
Visit the official website of NSDL-CRA.
Enter your user ID (PRAN) and password to log in.
Under the “Transact Online” tab, select “Withdrawal”.
Select “Partial withdrawal from Tier-I” from the available options.
Confirm your PRAN and click the “Submit” button.
Enter the percentage of funds to be withdrawn along with the reasons for withdrawal.
And Click “Submit”.
An online form will be generated which subscribers have to submit to the nodal office along with the following documents:
Original PRAN card
Advance stamp receipt filled and cross-signed on the revenue stamp by the account holder.
Bank letterhead, bank passbook, bank certificate or a cancelled cheque that contains the account holder’s name, bank account number, and bank IFSC code.
Request cum undertaking form if the subscriber is eligible to withdraw the complete corpus.
Subscribers have to download appropriate forms for withdrawal (partial withdrawal, exit, or retirement), fill them with relevant details, and attach them with the supporting documents mentioned above. They have to submit these forms at the nearest Point of Presence Service Provider (PoP/PoP- SP).
NPS Tier-II withdrawal
Tier-II account withdrawal can only be carried out offline through a PoP-SP. To do the same subscribers have to fill out a UOS-S12 form and attach it with the supporting documents. The PoP will initiate the withdrawal request and disburse the amount within 3 days.
What are the Tax Implications on NPS?
Provisional Income tax benefits on the National Payment System are available under the following sections:-
Section 80CCD (1)
Rs.1.5 Lakh – Available under the overall tax exemptions offered under Section 80C.
Section 80CCD (2)
14% of salary (basic + DA) contributed by the employer Over and above Section 80CCD (1)
Section 80CCD (1b)
Rs. 50,000 – Over and above Section 80CCD (1) and Section 80CCD (2)